Monthly Archives: November 2014

This was expected to be a quiet week, at least in terms of economic news.

The only real bit of important information was going to be this morning’s 3rd quarter GDP report, as well as any revisions to the previous quarter.

For the previous two quarters those revisions were fairly significant and took the markets by surprise, although in different directions. There are both good surprises and bad surprises.

The first of those revisions was a little stunning and probably reflected the really horrible weather of last winter. This time around, just like the last time, the revisions are of the good kind, but not so much that people are starting to whisper about inflation.

At some point, that will become a topic of discussion and concern, but for now, any economic growth, even if via revisions, is welcome.

This time, however, the good GDP news doesn’t appear to be translating into any market euphoria, so another potential catalyst to take markets higher may have gone by the wayside, although you never do know how the market will react once the bell rings for real. The opening futures rarely foretell what’s going to happen in the actual trading session unless the futures are very strongly higher or lower.

This morning the futures were virtually unchanged as a result of the GDP report and were pointing mildly higher to begin the session. The day’s trading eventually was a good reflection of the futures and ended the day perfectly flat.

Didn’t even set a new record today. What are the chances of that?

After a few opening trades yesterday there may still be some opportunity to do something in this shortened week, but now with only 1 1/2 days of premium remaining there’s not likely too much incentive to do anything with an expiration this Friday. Even the sale of calls on uncovered positions, if those opportunities arise, are more likely to now start looking at subsequent week expirations.

As the week approaches the erosion of time value there may be some opportunity to also look for rollovers a little earlier than usual and that’s exactly what happened today on a couple of positions.

Typically the rollover process begins on Thursday, although the ideal is most often on Fridays and the closer to the end of trading, the better. However, sometimes when erosion begins sooner or when there is already not much premium remaining, there may be reason to act sooner, especially if there is a prospect, otherwise, of not being able to make the trades.

Lately, the rollovers have been more difficult to execute as the volume and price expectations have been aberrant. A little volatility would go a long way toward getting both the volume and the bid-ask spreads to become more reasonable.

Today I expected relatively little market action and got exactly that, but was very happy to get some rollovers done. I think, though, that I would have been happier to get some uncovered positions finally find cover and contribute something to the bottom line to help pay for this week’s Thanksgiving Dinner.

This was expected to be a quiet week, at least in terms of economic news.

The only real bit of important information was going to be this morning’s 3rd quarter GDP report, as well as any revisions to the previous quarter.

For the previous two quarters those revisions were fairly significant and took the markets by surprise, although in different directions. There are both good surprises and bad surprises.

The first of those revisions was a little stunning and probably reflected the really horrible weather of last winter. This time around, just like the last time, the revisions are of the good kind, but not so much that people are starting to whisper about inflation.

At some point, that will become a topic of discussion and concern, but for now, any economic growth,m even if via revisions, is welcome.

This time, however, the good GDP news doesn’t appear to be translating into any market euphoria, so another potential catalyst to take markets higher may have gone by the wayside, although you never do know how the market will react once the bell rings for real. The opening futures rarely foretell what’s going to happen in the actual trading session unless the futures are very strongly higher or lower.

This morning the futures were virtually unchanged as a result of the GDP report and were pointing mildly higher to begin the session.

After a few opening trades yesterday there may still be some opportunity to do something in this shortened week, but now with only 2 1/2 days of premium remaining there’s not likely too much incentive to do anything with an expiration this Friday. Even the sale of calls on uncovered positions, if those opportunities arise, are more likely to now start looking at subsequent week expirations.

As the week approaches the erosion of time value there may be some opportunity to also look for rollovers a little earlier than usual. Typically that process begins on Thursday, although the ideal is most often on Fridays and the closer to the end of trading, the better. However, sometimes when erosion begins sooner or when there is already not much premium remaining, there may be reason to act sooner, especially if there is a prospect, otherwise, of not being able to make the trades.

Lately, the rollovers have been more difficult to execute as the volume and price expectations have been aberrant. A little volatility would go a long way toward getting both the volume and the bid-ask spreads to become more reasonable.

Today I expect relatively little action, though, but would be very happy to get some uncovered positions finally find cover and contribute something to the bottom line to help pay for this week’s Thanksgiving Dinner.

There’s not a single Federal Reserve Governor scheduled to speak this week as it will be a very quiet and short trading week.

While there will be a GDP release and some Jobless number statistics, unless there is another big revision to GDP, as we have already had twice this year, I don’t expect too much impact from the abbreviated schedule of economic announcements for the week, particularly as reports will be crammed into a shorter reporting period and may simply cancel one another out if offering conflicting views or interpretations over what is going on.

While many will begin the Thanksgiving holiday early and trading will be very light, the Thanksgiving Week sometimes starts off the final 5 weeks of a traditional rally for the year, as the November – December period usually out-performs the rest of the year.

Most of the focus shifts to retail and the script is usually the same. After the first couple of days of mega-sales, which are now being disclosed as perhaps not the great shopping bargains that everyone has been led to believe, the initial reports are usually of disappointing early sales.

The concerns about slow sales generally continues as people are led to believe that desperate retailers will lower prices even more.

Then, when it’s all said and done it’s revealed that sales for the holiday season were better than expected.

For the next five weeks prepare for an onslaught of these retail centric stories and constant talk about sales levels.

With consumer optimism rising and the holidays finally here, anything less than a really robust holiday sales season would have to be very disappointing, but we may have to prepare ourselves for the same weather related calamities lots of retailers faced last year, if the early indications are any predictor of what’s to follow.

This week with more cash in hand than has been the case for a while and with already some reasonable distribution of expirations for the December 2014 option cycle, I’m approaching this week with a very open mind.

While I’m not too likely to go wild with all of that cash, I’m not at all adverse to adding new positions. However, after 5 consecutive weeks of gains a low volume trading week can result in any kind of exaggerated movement. Also, plowing too much back in as the market is again at new highs should probably be questioned.

This week already has a number of ex-dividend positions so some income is already there for the week. Given that premiums will not only be light due to the extremely low volatility but also due to only having 3 1/2 days of time value, there may be some reason to look beyond this week’s expiration and perhaps to the December 12, 2014 expiration, which currently has no positions set to expire on that date.

However, as it worked out, two of the three new positions opened today will be expiring next week and the third will expire at the end of the month.

Another good thought and strategy gone to waste, as nearly every day stands on its own and doesn‘t easily lend itself to prediction or following a carefully planned script.

I would like to add to both the health and technology sectors and had been considering Microsoft this week, following its downgrade on Friday, but didn’t include that in this week’s Weekend Update, but would be happy to add that on any weakness. Instead, the weakness in Microsoft wasn’t really enough to justify doing anything today,but at least Lexmark is still nominally a technology company and it was going ex-dividend tomorrow.

That was good enough.

Otherwise, it’s was just another Monday to sit and see where sentiment would take us to begin the week. The difference was that there wasn’t too much time to make decisions and still get any kind of reasonable premiums as time will be running out very quickly this week.

That resulted in making some opening weekly trades quicker than I’ve done for the past few months, as I do like trading oin the first 30-60 minutes, but for the longest time that first hour has been good for nothing much more than head fakes.

Today that wasn’t the case as the market just traded in a narrow range all day offering little of interest after those first couple of trades.

I hope the rest of the week brings some considerable strength and the opportunity to have another week like last week and see a nice combination of assignments, new covered positions and rollovers.

There’s not a single Federal Reserve Governor scheduled to speak this week as it will be a very quiet and short trading week.

While there will be a GDP release and some Jobless number statistics, unless there is another big revision to GDP, as we have already had twice this year, I don’t expect too much impact from the abbreviated schedule of economic announcements for the week, particularly as reports will be crammed into a shorter reporting period and may simply cancel one another out if offering conflicting views or interpretations over what is going on.

While many will begin the Thanksgiving holiday early and trading will be very light, the Thanksgiving Week sometimes starts off the final 5 weeks of a traditional rally for the year, as the November – December period usually out-performs the rest of the year.

Most of the focus shifts to retail and the script is usually the same. After the first couple of days of mega-sales, which are now being disclosed as perhaps not the great shopping bargains that everyone has been led to believe, the initial reports are usually of disappointing early sales.

The concerns about slow sales generally continues as people are led to believe that desperate retailers will lower prices even more.

Then, when it’s all said and done it’s revealed that sales for the holiday season were better than expected.

For the next five weeks prepare for an onslaught of these retail centric stories and constant talk about sales levels.

With consumer optimism rising and the holidays finally here, anything less than a really robust holiday sales season would have to be very disappointing, but we may have to prepare ourselves for the same weather related calamities lots of retailers faced last year, if the early indications are any predictor of what’s to follow.

This week with more cash in hand than has been the case for a while and with already some reasonable distribution of expirations for the December 2014 option cycle, I’m approaching this week with a very open mind.

While I’m not too likely to go wild with all of that cash, I’m not at all adverse to adding new positions. However, after 5 consecutive weeks of gains a low volume trading week can result in any kind of exaggerated movement. Also, plowing too much back in as the market is again at new highs should probably be questioned.

This week already has a number of ex-dividend positions so some income is already there for the week. Given that premiums will not only be light due to the extremely low volatility but also due to only having 3 1/2 days of time value, there may be some reason to look beyond this week’s expiration and perhaps to the December 12, 2014 expiration, which currently has no positions set to expire on that date.

I would like to add to both the health and technology sectors and had been considering Microsoft this week, following its downgrade on Friday, but didn’t include that in this week’s Weekend Update, but would be happy to add that on
any weakness.

Otherwise, it’s just another Monday to sit and see where sentiment take us to begin the week. The difference is that there isn’t too much time to make decisions and still get any kind of reasonable premiums as time will be running out very quickly this week.

MONDAY: A very quiet and very short trading week which traditionally begins a period of market strength until the end of the year, as focus will begin on the last 5 weeks of retail sales

TUESDAY: Today has all of the makings of a quiet day, other than the fact that GDP report is being issueds this morning and it has been the subject of some significant revisions this year that have taken the markets by surprise. We’ll see.

WEDNESDAY: It should, again, be another quiet day, at least in terms of trading volume. While there is some key economic news being released today, there won’t be too many around to respond to it

THURSDAY: Happy Thanksgiving to all.

FRIDAY: Huge drop in Energy Sector this morning not translating into market optimism that usually characterizes cheap energy, but more importantly, the day after Thanksgiving